It is 11 October 2021. We invite you to the next episode of the “Weekly Tax Review” prepared in cooperation with tax experts in KPMG in Poland.
In today's episode:
- Slim VAT 2 from 1 October 2021
- Regulations on structured invoices and the National System of e-Invoices adopted by the Sejm
- The alternative investment company does not provide CIT exemption for taxpayers who allocate their income for statutory purposes
- Payments from a foreign family foundation to the founder as the beneficiary constitute a dividend referred to in the regulations on a foreign controlled entity
- Tax and accounting limits for 2022
Slim VAT 2 from 1 October 2021
On 1 October 2021, a package of further changes to VAT (“Slim VAT 2”), entered into force. The changes concern inter alia the relief for bad debts in VAT. The existing requirements depending the possibility of correcting the output VAT from the condition that the debtor, at the time of delivery of goods or services and on the day preceding the correction of the declaration by the creditor, was a registered active VAT payer and was not in the process of restructuring, bankruptcy or liquidation proceedings, were abolished. The change in regulations in this respect implements the judgment of the Court of Justice of the European Union of 7 December 2020 (C-335/19). The period during which it will be possible to take advantage of the bad debt relief has also been extended from 2 to 3 years. The package includes also, among others, clarification of the regulations on chain transactions in VAT, by specifying to which delivery in the case of export or intra-Community supply should be assigned the shipment or transport of goods, if the entity that organizes the transport is not the purchaser or the intermediary entity. The assumption will be that if the transport is arranged by the first or the last purchaser, the shipment or transport of the goods will be assigned to the delivery organized by the first or last purchaser, respectively.
Regulations on structured invoices and the National System of e-Invoices adopted by the Sejm
On 1 October 2021, the Sejm passed the act amending the Goods and Services Tax Act and certain other acts, introducing regulations on a new type of invoice, the so-called structured invoices (e-Invoices) and the system through which it will be possible to issue and receive them, (the National System of e-Invoices – KSeF). The essence of e-Invoices will be issuing and sending them directly from taxpayers' financial and accounting programs in a structured digital form, using the system operated by the Ministry of Finance, i.e. the National System of e-Invoices. The use of e-Invoices through the KSeF system will give the right to use also the facilities regarding VAT settlements provided by the legislator, which at the same time are to be a factor encouraging the use of this solution during the period in which its use will be voluntary. The taxpayer issuing e-Invoices will have, among others, the possibility of using, under certain conditions, a VAT refund resulting from structured invoices within 40 days (instead of 60 days. However, the amount of input tax for refund within this period may not exceed 3,000 PLN. Taxpayers issuing structured invoices via the KSeF system will also be released from the obligation to archive and store them - the e-Invoices will be stored directly in the system for a period of ten years from the end of the year in which the document was issued. The bill will now go to the Senate. The new regulation will enter into force on 1 January 2022. In the first stage, issuing invoices through the new system will be voluntary. According to the announcements of the Ministry of Finance, the use of e-Invoices ultimately will be mandatory.
The alternative investment company does not provide CIT exemption for taxpayers who allocate their income for statutory purposes
On 5 October 2021 the Supreme Administrative Court issued a judgment (ref. II FSK 556/19) in the case of an academy considering investing its operating income in the acquisition of participation rights in an alternative investment company. The Supreme Administrative Court ruled that the standpoint of the academy, according to which the operating income invested in the acquisition of participation rights in an alternative investment company will benefit from CIT exemption for the taxpayers who allocate their income for statutory purposes in the case of investing the income by purchasing participation units in investment funds, had to be considered incorrect. In the opinion of the Supreme Administrative Court, not every alternative investment fund is an investment fund within the meaning of the Act on Investment Funds. The definition of an investment fund, which specifies the forms of operation of these funds, uses a closed catalogue, which does not include alternative investment companies. The differences between investment funds explicitly mentioned in the regulations and alternative investment companies are so significant that it cannot be assumed that alternative investment companies are investment funds in the meaning of the Act on Investment Funds.
Payments from a foreign family foundation to the founder as the beneficiary constitute a dividend referred to in the regulations on a foreign controlled entity
On 5 October 2021 the Supreme Administrative Court issued a judgment (ref. II FSK 2904/20), deciding whether payments from a family foundation for the founder as a beneficiary, constitute a dividend. The dispute concerned the correct interpretation of the provisions of the PIT Act on a foreign controlled entity and the assessment of whether it can be assumed that the dividend payments specified in these regulations should be understood as any situation in which participation in the profit of a foreign controlled entity is materialized, regardless of the form of such payment, and whether these regulations also cover payments in the form of a donation or other benefit made by a foreign family foundation (foreign controlled entity) to its beneficiaries. The Supreme Administrative Court ruled that the concept of a dividend referred to in the regulations on a foreign controlled entity must be interpreted broadly enough to correspond to the concept of participation in the profits of the controlled entity. Consequently, payments from the family foundation to the founder as the beneficiary should be treated in the light of the above regulations as a broadly understood dividend received from a foreign controlled entity, which is deductible when determining the tax base.
Tax and accounting limits for 2022
Some tax and accounting limits are calculated on the basis of the average exchange rate announced by the National Bank of Poland on the first business day of October of the previous year. This year the rate was 4.5941 EUR. This means e.g. that in 2022 the limit for small taxpayers in PIT and CIT will be 9,188,000 PLN and the lump-sum taxation method will be available to the taxpayers conducting a business activity, who in 2021 will earn revenues not exceeding 9,188,200 PLN. CIT at the rate of 9 percent will be available for the taxpayers whose revenues for 2021 will not exceed 9,188,000 PLN gross (i.e. including VAT) and whose current revenues in 2022 will not exceed 2 million EUR net (i.e. without VAT), but at the exchange rate from 3 January 2022. The possibility of quarterly settlement applies to small VAT taxpayers. The limit for them is 1.2 million EUR of gross turnover in the previous year. This means that the small VAT taxpayer next year will be the one whose sales in 2021 will not exceed 5,513,000 PLN.
Amendments to the Excise Duty Act
On 17 September 2021, the Lower House of the Polish Parliament passed an amendment to the Excise Duty Act. The principal purpose thereof is to enable the continuation of the activity of a tax warehouse in the event of resignation by the current warehouse keeper, without the need to terminate the application of duty suspension procedure for excise goods stored in that warehouse. The act will now be passed on to the Senate and is to enter into force on the day following its announcement.